Squarespace: A quiet success story
In 10 years' time, the website-publishing startup has grown from dorm room dream to Super Bowl star.
FORTUNE -- Andrew Braccia, a Silicon Valley venture capitalist, often rolls his eyes when he comes across yet another list of the hottest New York startups. Most often, Squarespace, which he helped to finance, does not make the cut. Yet, he says, Squarespace is bigger and more successful than most of those that have become regular fixtures on those lists. "That's part of Anthony's personality," says Braccia, of Accel Partners.
Braccia is speaking of Anthony Casalena, the low-key founder and CEO of Squarespace, which he started 10 years ago in his University of Maryland dorm room. Over the years, Casalena has largely avoided the spotlight, the meet-ups, and the conference circuit as he quietly built Squarespace into a popular and powerful website publishing and hosting platform.
Squarespace's ascent is likely to become less quiet soon. On Sunday, the company will test the waters with marketing's most potent spotlight: A 30-second spot during the Super Bowl.
Casalena says Squarespace is ready for the exposure. "We are pretty confident that the product can be picked up by anybody with enough time and get a great result out of it," Casalena says. "A great website."
While not nearly as well known as many of its New York startup peers, Squarespace now employs 259 people across three buildings in Manhattan's SoHo neighborhood (up from 190 in November, when this reporter first interviewed Casalena). It has hundreds of thousands of paying customers, who use the service to build and host their websites. Many are small- and mid-sized businesses -- restaurants, musicians, photographers, retailers -- but big brands like Target (TGT), GQ, Volvo, and Sony (SNE) also use its services. Sales are growing at more than 100% a year, and an IPO in the next couple of years is not out of the question.
That's not what Casalena set out to do back in 2003, in the aftermath of the dotcom crash. A precocious programmer who taught himself to code when he was 14, Casalena first set out to build a slick website for himself. Soon he realized that many of the on-site editing tools he had developed for his project could be useful to others and decided to offer them up as a service.
Casalena raised $30,000 from his father and spent $20,000 on servers, which he installed himself. Another $2,000 went to designing a logo. On Jan. 6, 2004, he put out a press release announcing his offering. In the first year, he made about $50,000. The following year, revenue had climbed to $250,000. "It was a very successful project, but not really a company," he says. In the third year, he hired a contractor and a person to deal with customer care, but he was still doing most of the work -- including answering tens of thousands of customer tickets -- himself.
That's when he decided to try to turn the project into a company. Squarespace was profitable, so Casalena did not need to bring in investors. He continued growing the company organically, using its rising revenue to market the service and to hire engineers and customer support staff. As the company grew to about 30 employees by 2010, investors and others began to notice. Casalena found himself rebuffing offers.
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Despite Squarespace's success, not everything was running smoothly. "I had never worked at a big company before," he says. "I didn't know what good management was or what bad management was. It was very easy to make mistakes." Casalena says that at times he hired the wrong people. "I was too slow to part ways with certain people," he says.
After bootstrapping the company for seven years, Casalena decided to change course. He took a whopping $38.5 million in venture capital from two marquee investors: Accel, which is most famous for being the first venture capital firm to invest in Facebook (FB), and Index Ventures, known for backing companies like Skype, Dropbox, and Flipboard. The financing helped with things that had become difficult, like buying more servers or getting credit from banks. But the main benefits, Casalena says, came in the form of professionalism and legitimacy. "I didn't have the right level of advisors around me, and I didn't have the right level of credibility to build the right kind of management team," Casalena says. The investment changed that overnight. With the money, Squarespace was also able to completely rebuild its technology platform, with new capabilities, including support for e-commerce websites.
The company has been on a tear since. Customers are attracted by Squarespace's ease of use. Its tools allow anyone to quickly build a professional-looking website, and there are no upfront costs. Customers pay between $8 and $30 a month to host their sites on Squarespace. "They have figured out a way to build professional, high-quality, beautiful websites that people are proud of and that customers really love," Braccia says. "What used to cost $10,000, $20,000, or even $30,000, now for you can do for $20 a month."
Not surprisingly, Squarespace is hardly alone in the business of helping customers build and host slick websites on the cheap. Competitors include various blogging and publishing platforms, as well as startups like Wix and Weebly, one of the hottest companies to come out of the Y Combinator incubator in Silicon Valley. "For any business, having a place on the web that defines who you are has become ever more important," Braccia says. "The market is so large."
Casalena says he was convinced to go for a Super Bowl spot after an early foray with TV advertising in the fall paid off. (Overall, the company spent about $20 million in marketing in 2013 and plans to double that sum this year.) The Super Bowl spot opens with a grotesque caricature of the web's underbelly: the hucksterism, gambling, cybercrime, mortgage peddling, and shady dealings. It's all a prelude to Squarespace's message: "We can't change what the web has become, but we can change what it will be. A better web starts with your website."
Casalena says he wants to temper expectations about the ad's impact. At the same time, he says, Squarespace's biggest hurdle to attracting even more business is competition, but a lack of brand awareness among potential customers. "I don't think anything is a silver bullet, but I think it will be a hugely impactful thing for us," he says.